Plan to expand into omni-channel distribution, says Snapdeal

Value e-commerce marketplace Snapdeal plans to expand into omni-channel distribution using an asset-light model, invest in a portfolio of “power brands” and continue to grow its unit Unicommerce within India and international markets as part of its growth strategy.

According to Snapdeal’s preliminary documents filed with markets regulator Sebi on Tuesday, the company is “well-positioned to tap into the unique attributes of the value lifestyle retail market”, which it believes will be driven by consistent growth in consumption of value shoppers and increase in base of digitally-native users.

Outlining its growth strategy, Snapdeal said the company intends to create a distribution channel through offline stores, partnering with existing neighbourhood stores and new franchisees, across the country as part of its expansion plans.

“We believe that our wide network of sellers, technology, marketing and data science capabilities will offer a competitive advantage to our partners and further increase our reach in the value segment…Further, we can derive service and cost advantages from being closer to users. The potential omni-channel model can derive advantages by virtue of our current position and capabilities,” it added.

Snapdeal is looking at a public issue that comprises fresh issuance of equity shares worth Rs 1,250 crore and an offer for sale (OFS) of 3.07 crore equity shares.

According to market sources, potential listing could value Snapdeal at about USD 1.5-1.7 billion.

According to Snapdeal’s draft red herring prospectus (DRHP), the company’s high brand awareness, platform integration and digital marketing capabilities can be used to drive footfalls in Snapdeal branded stores.

“Further, we can use Unicommerce’s proprietary omni-channel technology solutions, which they have been deploying for their clients, in our proposed omni-channel expansion,” it stated.

Besides, Snapdeal intends to grow Unicommerce, which was profitable for financial years 2019 and 2021 and the six months ended September 30, 2021, within India and international markets.

“We believe that there is scope for increasing the scale of Unicommerce by expanding its client base and geographical coverage, which we expect will further drive the growth of our revenues…We plan to grow Unicommerce’s existing client business in India through client acquisition initiatives,” the document said.

Unicommerce has already entered international markets such as the Middle East and South East Asia and plans to scale client acquisitions in these geographies.

“In addition, we intend to enter new geographies, such as North America and Europe. Our plans for doing so include monetising and retaining existing clients, as well as identify and capitalise on growth pockets in adjacent domains,” it noted.

Snapdeal highlighted that it has a portfolio of 13 ‘Power Brands’ that accounted for 5.6 per cent of the total orders on its platform for the six months ended September 30, 2021.

‘Power Brands’ are brands owned by Snapdeal that it licenses to sellers. The sellers of products under its ‘Power Brands’ are responsible for manufacturing the products under the ‘Power Brands’, and Snapdeal does not manufacture or own any inventory relating to these brands.

“We aim to significantly increase the share of ‘Power Brands’ to the total sales on our platform, and aim to do this by selecting appropriate products to develop Power Brands and adding new sellers to our platform. We plan to explore deeper tie-ups with manufacturers across a range of product categories,” Snapdeal said.

The company also plans to increase the quantity and diversity of product offerings of its existing power brands as this presents an opportunity to specifically target demand gaps, through data-driven insights and joint product development with sellers, it added.

Value-conscious consumers who demand quality products at affordable price points are a significant growth driver of the value lifestyle Retail market.

This market’s size is expected to grow from USD 88 billion in financial year 2021 to USD 175 billion by the financial year 2026, at a CAGR (compound annual growth rate) of approximately 15 per cent, it added.

As per the document, Snapdeal’s revenue from operations was at Rs 238.5 crore for the period ended September 2021, Rs 471.7 crore for the fiscal year ended March 31, 2021 and Rs 846.3 crore for FY20.

Snapdeal’s restated loss for the six months ended September 30, 2021 was at Rs 177.07 crore, Rs 125.4 crore for financial year 2021 and Rs 273.5 crore for FY20.

The company noted that it typically incurs significant marketing and business promotion expenses to promote its platform. For the six months ended September 30, 2021 and FY2021, its marketing and business promotion expense was at Rs 126.2 crore and Rs 176.6 crore, respectively.

Since FY2018, 50.37 million customers have transacted on our platform, and 42.04 million of these customers have come from locations outside metro cities, showcasing our nationwide reach.

During the six months ended September 30, 2021, Snapdeal had an average of 40.15 million MAUs (ie, persons who visit and browse Snapdeal’s platform).

It had 14.82 million and 13.88 million annual transacting customers for the 12 months ended September 30, 2021 and FY2021.

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